This is Part 3 of my case study profiling the benchmark recruiting best practices of the Valero Energy Corporation. After a lengthy study that began in January of 2005, I have found it to be the most business-like recruiting function — and one of the best overall — in the world. This one-of-a-kind business-like approach is due in large part to the department’s support from senior management and to the fact that the manager of recruiting is a former CEO. Here in Part 3 of the case study we’ll continue coverage of Valero’s best practices in recruiting.
Recruiting Department Structure: Best Practices
The recruiting team at Valero applied the management science principles of agility, “mass customization,” and customer relationship management when it designed the organizational structure of its recruiting department. Unlike most recruiting departments, which typically have a single strategy and a consistent approach that is applied across all business units, Valero’s recruiting management developed a system to “mass customize” how it delivers recruiting services depending on the unique needs of the business unit. The practice of both identifying the unique business needs of every major business unit and then making a customized service delivery plan for them is only given lip service in most companies, unfortunately. Some of the best practices in the area organizational structure include:
- Mass-customized recruiting is used to meet the needs of each business unit. The fact is that the majority of recruiting departments (82%) do not have a written recruiting strategy or plan. Those that do tend to have a single, company-wide strategy that employs a one-size-fits-all approach. This approach offers little flexibility if the recruiting needs of different business units vary dramatically, as is the case at Valero. In order to meet the distinct needs of the units and to ensure alignment with the business, Valero has borrowed a mass-customized approach (often seen in outsourced manufacturing) and applied it to recruiting. The system works like this: Upon receiving the projected labor needs data, each refinery defines their staffing, developmental, and training needs. Instead of providing the traditional inflexible support, staffing and OD, working together, can now provide customized solutions for each individual refinery. Consequently, staffing is being driven by the unique business needs of each refinery in the system and a plan to develop the target workforce is developed specifically for those needs, which coordinates training, development, attraction, redeployment, and retention.
- Great recruiting requires service level agreements (SLAs). No recruiting function can succeed without the cooperation of hiring managers. Because Valero understands that hiring managers do not always respect or give high priority to the recruiting function, the department has developed a significant number of service level agreements with line managers. These SLAs promise a manager a certain level of service if they use and meet the requirements of the manager self service system. These agreements build confidence among hiring managers that recruiting can do everything that it promises. Valero uses a positive reinforcement approach, while most other organizations use the SLA as an enforcement tool. Most recruiting managers have failed to recognize that service level agreements can be used as a tool to get the attention of wayward hiring managers. I have found over the years that more than half of the delays in recruiting are caused directly or indirectly by line managers. SLAs have been used as a tool to force line managers to read new resumes quickly and to meet their interview schedules. When managers repeatedly fail to do their part, recruiting organizations have the option of either lowering the priority of their jobs or of cutting them off completely from recruiting services. Finance and IT have effectively utilized service level agreements and punishments for not adhering to the agreed-to terms for years. As part of a service-level agreement at Valero, the recruiting function guarantees speed and responsiveness to hiring managers. In order to keep that promise, the recruiting function at Valero guarantees to hiring managers that:
- Within 48 hours of position request, recruiting will create the sourcing plan, a screening questionnaire, and a testing plan, and they will post the job to all targeted boards and labor suppliers.
- Within the next seven days, recruiting guarantees that they will mine the Internet, all major job boards, and the internal database and then present the top candidates to managers.
- The recruiting function guarantees that within 48 hours of a manager request, they will phone-screen all targeted applicants to ensure that they have the required KSAs and cultural fit.
- Recruiting guarantees that twice weekly the candidate pool will be reassessed and top applicants will be pushed to management.
- Recruiting guarantees a 24-hour response time to any manager’s request related to additional application information and applicant interviewing logistics.
- Recruiting guarantee son-boarding will be completed within seven days.
A sample of their simplified SLA is available to readers by clicking here.
- Prioritizing business units and jobs. Most recruiting organizations treat requisitions equally on a first-come, first-served basis, but not all jobs have the same impact on the firm’s bottom line. Valero has found that, as with most business functions, 80% of the impact comes from 20% of the hires. So as part of a new strategic effort, senior management has recently worked with recruiting to prioritize its efforts toward certain divisions in order to increase recruiting’s overall impact. In addition to this prioritization, recruiting has always prioritized jobs within departments and divisions based on the rankings of that business unit’s managers.
- Continuous external branding. Because automated candidate mining tools can be used to find and define huge populations of targeted candidates, Valero uses these continually updated lists to create a “friends of Valero” network that is used to brand Valero on an ongoing basis. For example, when Valero acquires a new company, a branded message is sent to all new employees. If Valero wins new awards and they are hiring people with backgrounds that are related to the award area, they push a branded message to those groups. They allow any recipient to opt out at any time. Being a refiner means that very few people in the country have ever heard of Valero, so branding becomes an essential tool to recruit people into non-oil-related functions. As Valero’s director of recruiting, Dan Hilbert, puts it: “This branding program really rocks.”
- Internal branding helps to energize a successful employee referral program. Valero does a superb job of marketing the benefits of working for Valero to its employees (they have some amazing bonuses and benefits). According to Hilbert, “their very happy employee base is an energized and mobilized recruiting machine” that accounts for over 30% of all FTE positions filled. In the supply chain model they use, their employees are by far the biggest supplier of labor and are treated extremely well. As Hilbert confidently states, “Even if we didn’t compensate employees for the referral hires, I’d be willing to bet that Valero employees would still refer over 20% of all FTE employees hired.”
- They have a recruiting culture. Great firms involve everyone in recruiting. Where many companies merely pay lip service to “win-win” relationships, Valero considers close, mutually beneficial relationships as key to long-term success. Consequently, Valero’s vendors and partners are a major source for finding top talent. As one manager puts it, “They are often considered an extension of our recruiting department.” Valero has grown through constant acquisitions since 1998; they have acquired employees, senior-level management, and professionals from all domestic refiners and related consulting firms. They take advantage of those existing relationships by encouraging all employees to network very actively. This is done with class and grace, in more or a “might you know someone who would be interested?” style rather than the more aggressive approach.
- Every recruiter has a learning and development roadmap. Since “operational excellence in every employee, system and process related to recruiting” is the department’s goal, recruiting management included recruiter development when it modeled other best processes and practices. As a result, Valero knows exactly what its own staff’s internal training requirements are. This is operationalized by providing each recruiter with a clear learning and development roadmap. The training and the roadmap, when combined with the high level of passion held by Valero recruiters, provides everyone with a clear direction and results in one of the best organized recruiting departments in the world. The department holds quarterly meetings with all recruiters to assess the department’s progress in its mission. It also held a four day meeting to develop the staffing department’s mission and vision statements to ensure that everyone was on the same page.
- Working in the centralized recruiting function requires energy and passion. Although the recruiting function provides customized services to individual refineries, much of the recruiting effort can be characterized as a centralized function, which is the recommended best practice. Because of Valero’s businesslike approach, centralized recruiting not only includes traditional recruiters, but also people talented in the critical areas of PR, branding, analytics and technology. As a result, it uses some unique job titles that are generally not found in corporate recruiting. Valero recruiting is staffed by recruiting specialists; staffing technologists; a metrics, analytics, and report specialist; a marketing, PR, and branding specialist; and dedicated recruiters assigned by business division in their area of expertise. The department also heavily relies on “premier interns” to do much of the emerging work. Technology, branding, and metrics are the primary drivers of recruiting, and as a result, these, along with business acumen, are primary criteria for selecting recruiting professionals. Recruiters are selected based on their “unbridled determination for doing whatever it takes to be part of the best team in the industry,” according to Hilbert. They also must have a “measurable passion for customer service, be technologically oriented, and possess extreme energy” (“poster children for hyperactivity” is the non-politically correct phrase they use to describe it). Recruiters must also excel at multi-tasking, be attracted to and thrive in pressure situations, and have strong people skills. Most new recruiters come from converting college interns. Other recruiters come through employee referrals and advertising. Valero has had great success in hiring top interns, training them, and then setting them free, using limited resources. As Valero’s manager of employment puts it, “It’s astonishing to see what this youthful generation who grew up eating, sleeping, and breathing technology can do with a minimal amount of business training. It’s a beautiful thing to watch!”
- Valero is in a “warlike” mode, and their motto is “become stagnant and die.” The department’s goal was to totally change staffing department personnel from an administrative mentality to a pure business focus, where recruiters understand business costs, shareholder return, efficiency, productivity, and strategic objectives. An essential element of that strategy was utilizing the business practices of visioning and best practice sharing and applying them to recruiting. Through visioning, developing a slogan, and focused messaging, the recruiting leadership sought to “instill a mentality that recruiting is at war to help win the future of our company, and that every action we take must be focused, planned and implemented with the intensity level required to win that war.” Once the staff assumed this “warlike” mentality, the next step was to develop a formalized process of best practice sharing and continuous improvement. They realized early on that because both the energy industry and recruiting are rapidly changing, the recruiting function must have a continuous improvement component included in everything they do. In addition, the entire team meets monthly to reassess their best processes and practices and to review problems and potential issues. Their continuous improvement motto is “become stagnant and die.” When new best processes and best practices are developed, one of the team members (even interns are involved) will take the lead to champion the new process or practice and ensure that energy is focused on the deployment of the new best process or practice.
Best Practices in Specialized Recruiting Functions Following are some of Valero’s best practices as they related to specialized recruiting functions:
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- Improving the quality of hire and business results by focusing on hiring “difference makers.” Many recruiting organizations struggle when it comes to quantifying the dollar value of hiring top performers over average performers. It turns out that very few organizations measure the quality of hire, and even fewer have attempted to quantify the “performance differential” between average and top performers. Jack Welch, for example, says that these “game changers,” the top 20%, perform between five and ten times better than the average worker. Bill Gates is purported to have said that the difference between an average programmer and a great one is 1,000 times. Dan Hilbert also thinks along these lines. “I study every report from McKinsey, Watson Wyatt, Harvard Business Journal, Deloitte, etc., to gain an accurate measure here,” he says. Once a candidate passes the cultural screen, all the efforts in recruiting are clearly focused on finding the top 20%. Although neither Valero’s senior management nor its recruiting department has reached any official conclusion, my research has determined that some managers there estimate the performance differential to be two-and-a-half times for the top 20% of their employees. If it is an accurate number, clearly focusing on these “real difference makers” will mean a continued increase in workforce productivity. Clearly these difference makers will be a primary source for their future leaders.
- The candidate experience utilizes a customer relationship management approach. The department has a heavy focus on improving the candidate experience, both to increase its offer acceptance rate and to improve its brand image. Their approach utilizes customer-relationship-management-like tools to ensure that all candidates feel they are getting timely and “personalized” responses to their applications. Some of the things they do to improve the candidate experience include: a quick, time-saving, single-click application process, a referral system, at least three personalized emails to each candidate throughout the application process, and a postcard in the mail after the job is closed.
- Orientation’s best practice is an extravaganza. Valero believes that great hiring does not end with the acceptance of an offer. As result, it has borrowed several tools from marketing, which have the desired effect of “reinforcing the sale” so that new hires feel good about their decision to sign on. Valero puts a great emphasis on new employee orientation and on-boarding because they want the day a new employee starts to be a memorable event. The initial orientation on an employee’s first day is nothing special. It is like a quick reference guide that covers the basics of working at Valero. Their best practice is their “extravaganza.” There half-day “WTV” (welcome to Valero) extravaganzas are led by Valero’s president — his involvement is designed to show the company’s commitment to getting new hires often a great start. The first half of the extravaganza covers “what Valero will do for you,” and the second half is an elaborate presentation about the key elements of the corporate culture.
- Stealth recruiting at non-recruiting events. Valero has begun to sponsor industry-specific events with no direct recruiting visibility. Sometimes the results are not immediate, but over time, this strategy works quite well. This is an approach that was pioneered by Michael McNeal, former recruiter extraordinaire at Cisco, where he made beer and wine festivals and home shows one of Cisco’s top sourcing venues.
- A focus on building a competitive advantage through technology. Roughly 90% of HR professionals and 75% of all recruiters consider only what their firm is doing when they make decisions. In direct contrast, most senior managers view everything externally, in an “us vs. them” mentality. To senior managers, every program must be viewed as something that is not just effective, but also demonstrably superior to what their competitors have. Part of every decision and program development process is the assumption that the competitor will react and counter every recruiting program and action. As a result, speed and continuous improvement become essential element in success. Valero’s recruiting team has responded to that competitive challenge with an ability to rapidly implement new and best-of-breed technologies to “attack” (their word) a specific challenge, competitive threat, or changing business condition. It is the foundation upon which they build situation- and location-specific best practices. With regards to technology, Dan Hilbert states, “We use a modular approach to implementing advanced technologies that can give us a competitive advantage so that we are not locked down by our technology.”
- Automated and continuous 24/7 web mining for candidates. Although Valero is an energy company, it operates as a technology company, and the recruiting function is no exception. While almost every company utilizes recruiters to recruit on the web, Valero goes a mile further and makes recruiting on the web an automated, 24/7 process that utilizes web-based mining technology, relevancy search, and ranking algorithms. For example, Valero’s recruiting technology uses a relevancy logic that runs at night on over 32 resume boards. The system automatically indexes and ranks the results, which are automatically dumped into the ATS. A recruiter selects the most desirable candidates and the system automatically sends a branding statement and an invitation for that person to apply. Valero also has an extensive job posting program using the major job boards. It differs from most in that it also has a dedicated niche- or industry-specific board posting program, and they use extensive industry-specific niche and chat room postings to augment the major boards. Valero’s primary technology support vendors include Novotus, InfoGIST, and HRsmart. Their manager of recruiting is very supportive of his vendors, and they are mentioned here because he attributes a significant portion of his success to them. He argues that “HRsmart is the most intuitive applicant tracking system on the market,” and he also states that “our users embrace and often learn advanced features on their own without training…their customer service is amazing.” He also praises Novotus as “the best kept secret in the staffing augmentation business. Mike Mayeux may be the most passionate staffing professional I’ve ever met.” A pretty strong quote coming from one of the most passionate recruiting professionals that I have ever met, Dan Hilbert, the person responsible for the team that developed this precedent-setting “business of recruiting” approach.
- Self service and portals. Because of their heavy reliance on technology, Valero provides a good number of “pipeline” portals. These include:
- An external portal
- A candidate portal
- An acquisition portal
- A vendor management portal
- A knowledge expert system
- A referral network on secure network
- A referral program portal
- An intern portal
- An employee portal
- Market research tools are utilized in college recruiting. As little as six months ago, Valero had virtually no brand presence at target universities. Because they are aware of how critical brand is on a college campus, they decided to borrow an effective business tool from marketing: the focus group. They conducted a series of six focus groups on different university campuses in order to identify both the positives and negatives of the Valero recruiting brand. They then used that information to develop a college recruitment strategy and to reinvigorate the college intern program. Part of their success can be attributed to Valero’s campus giveaway program, where they give out computer accessories to increase the student awareness of Valero.
- Internal executive search with self-service functionality. Very few recruiting functions do in-house executive search, so any innovation in that area is noteworthy. To that end, Valero is developing a dedicated self-service portal that executives can use to make executive referrals. This dedicated “refinery management talent portal” allows Valero’s executives to leverage their networks and to easily make referrals. In fact, by any standard, the overall effectiveness of the internal search function at this Fortune 15 company is certainly world class. It has filled over 95% of the director- and executive-director-level positions internally. In the past two years, Valero has only used retained search twice.
Other best practices employed by Valero:
- Talent pool. Valero maintains a candidate database that contains over one million individuals. The system allows for precision searches by skill, location, and competency. The goal is to eventually have a “who’s who” database that contains the names of the very best in the energy field.
- Retention. Although recruiting does not have any direct responsibility for retention, the department routinely tracks and analyzes the retention rates from the various sources and vendors it utilizes. Obviously, retention rates are also a key decision factor in selecting vendors.
- Current employees are part of the supply chain. At Valero, the internal staffing department (the function responsible for the placement of current employees) is integrated with external hiring as part of the labor supply chain process, so that it has the ability to rapidly scale to changing business conditions.
- A passive focus. Like most great recruiting functions, Valero has a passive candidate system that is designed to attract top performers who are not actively pursuing a job at the current time. Valero clearly understands that hiring a top 10% performer from a competitor is a double bonus, where Valero gains while the competitor loses. But it does its external recruiting in a more subtle way than most firms. Interestingly, Valero does not have a formal program for actively poaching from direct competitors because, according to Dan Hilbert, “Valero’s culture and values support a high level of graciousness.” This image sensitivity should not be confused with passivity. I have found that their top executives are extremely competitive. They just want to be viewed for their class and grace.
- Candidate presentations. Valero often asks candidates to give presentations on key topics as part of the onsite interview process. This serves multiple purposes beyond assessment, including competitive intelligence, learning best practices, and learning from the mistakes of others.
Coming next week, in the final part in this series on the best practices at Valero, we’ll look at Valero’s metrics, results, future plans, and weaknesses.